Venture Capital

Forbes Self-Made Women 2018: Aspect Ventures' Theresia Gouw shares her experience

(Watch the interview on Forbes)

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Innovation is our 'bread and butter,' says Aspect Ventures’ Jennifer Fonstad

Jennifer Fonstad, Aspect Ventures, discusses White House trade policies as fears grow about foreign tech investing and protecting intellectual property.

(Watch the discussion).

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No-fees mobile bank Chime raises $70M Series C, valuing its business at $500M

Chime, the San Francisco-based challenger bank known for its consumer-friendly features and lack of fees, has raised $70 million in Series C financing, led by Menlo Ventures. The round, which also included existing investors Forerunner Ventures, Aspect Ventures, Cathay Innovation, Northwestern Mutual, Crosslink Capital, and Omidyar Network, brings the company to over $100 million in total funding to date and values the business at around $500 million.

(Read on TechCrunch)

The startup is one of several challenger banks gaining popularity with a younger, millennial audience who sees no need for a bank with physical branches, and who are sick of being penalized by hefty fees for things like overdrafts or dropping below a minimum balance – fees that take advantage of consumers at their most vulnerable points in their financial lives.

As Chime points out, traditional banks charged consumers over $34 billion in fees in 2017. Its service, on the other hand, drops the consumer-facing fees.

There are no monthly fees, no minimum balance fees, no overdraft fees, no international transactions fees, and it has a network of nearly 40,000 free ATMs  Instead of gouging customers, Chime generates revenue from an interchange-based business model involving its accompanying debit card, where it earns about 1.5 percent in interchange revenue from Visa.

While the no-fee structure is a huge draw for consumers, Chime is popular also for its innovative feature set. Thanks to a founding team with a combination of both startup and finance experience, the app looks like something built by a technology company, not an old-fashioned bank.

Chime’s co-founder and CEO Chris Brittpreviously worked at Flycast, was an early comScore employee, and did time at Visa and Green Dot; co-founder and CTO Ryan King hails from Plaxo and Comcast.

“I started this company because Green Dot was really focused on the unbanked and under-banked people who couldn’t get bank accounts because they had bad credit or bad checks – that sort of thing,” explains Britt. “It was really not a full-featured bank account. And so what I wanted to do with this company was create a product that would serve more mainstream consumers – people who actually had accounts at [Bank of America] and Wells Fargo, but just aren’t particularly satisfied with those guys for variety of reasons – probably first, and foremost, the way they structure the products are quite punitive,” he says.

Chime launched to consumers in mid-2014, but didn’t offer the suite of features that would allow people to use Chime as a primary bank account until early 2016, Britt says.

Today, that feature set includes an automatic savings option that will round up purchases, and one that socks away 10 percent of your paycheck into your Chime savings account. It also has a popular no-fee paycheck advance feature that will make your direct deposited paycheck available to you early – as soon as the deposit is initiated by the payroll provider and the bank is alerted.

This feature set and no-fee structure has attracted a number of young professionals from all over the U.S. to switch. The company passed over a million accounts a couple of weeks ago, and is now adding well over 100,000 new bank accounts per month. It has also generated over $4.5 billion in transaction volume to date, and expects to reach $10 billion by year-end.

With the additional funding, Chime plans to scale the business further, not only with marketing and new hires to expand its nearly 80-person team in San Francisco to over 100, but also in the types of products it will offer and other new features.

“We think the next phase for us is going to be helping our members manage their credit and loans more effectively,” says Britt. “We think we can play a role in providing short-term lines of credit and helping members manage their debt.” However, he declined to share product details on that front.

Chime also has some deals in the works which will see the bank working with employers more directly, but couldn’t speak to the specifics at this time.

Along with the new round, Chime has added Shawn Carolan of Menlo Ventures to its board.

“The bank account is at the center of our lives, critical to both financial and emotional well-being,” Carolan said, speaking to Menlo’s investment. “We love how Chime’s business growth aligns with helping more members save more money for themselves rather than being gouged by hidden bank fees. This business model shift in financial services is inevitable and Chime is leading the way,” he added.

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Tari: Ticketfly Cofounder and Monero Ringmaster Start New Blockchain Project

Dan Teree has been building ticketing businesses since the dotcom days.

When Teree joined TicketWeb in 1999, the then 3-year-old company claimed to be the first ever to sell tickets to events over the Internet. Nearly a decade later—after a 7-year tenure at Ticketmaster, which bought TicketWeb for about $35 million in stock in 2000—he cofounded Ticketfly. Then an upstart, Ticketfly’s popularity soared on social networks like Facebook and Twitter, and culminated in a sale to Pandora valued at $450 million in 2015. (Once-rival Eventbrite took it over for $200 million last year.)

(Read on Fortune)

Now Teree is again striving to blend his business acumen with the web’s trend du jour. This time, that means blockchain: the distributed ledger technology that makes cryptocurrencies possible.

Admit One: Tari
On Wednesday, Teree and two cofounders announced a new startup, Tari, that plans to sell—you guessed it, tickets—except with a twist. The digital admission slips will be tracked and logged on a new, to-be-developed blockchain, also called Tari, complete with its own native, as-yet-unreleased cryptocurrency, dubbed “Tari tokens.” The team also aspires to create a marketplace beyond tickets to cover all sorts of digital goods, including loyalty points, virtual currencies, and in-game items.

Imagine Tari as a secondary market for virtual goods, like rock show passes, Starbucks Rewards kick-backs, and V-Bucks, the coin of the realm in Fortnite, a popular video game. Right now, it can be hard to transfer those assets between different websites and, at the same time, keep tabs on the items as they change hands, Teree says.

During Consensus, the blockchain industry’s biggest conference, Teree, Tari’s cofounder and chief operating officer, told me he believes blockchain tech can solve the problem of “economic leakage,” where middlemen reap all the revenue from the resale of virtual goods. He said Tari will be designed to help compensate original “owners,” like artists, sports teams, event promoters, and other parties.

That secondary market for live events tickets, which includes the likes of eBay-owned Stubhub, is sizable—and it continues to grow. A 2015 study by Technavio, a market research firm, projected that the market segment would exceed $15 billion by 2020. And that’s excluding the expansion to other as yet untapped digital goods, like loyalty points.

Meet the band
Tari is an unlikely crew. The startup will be led by CEO Naveen Jain, who is an angel investor in more than 40 ventures, including Flexport, a shipping logistics startup. In 1999, just as Teree was joining TicketWeb, Jain, then aged 19, founded Sparkart, an e-commerce shop that has counted artists such as Beyoncé, Slayer, Tim McGraw, and Mariah Carey, among its customers. In 2007, he cofounded Clique Here, a merchandise logistics business that has close ties to the music industry.

In one of his more recent exploits four years ago, Jain graduated from Y Combinator. He attended the startup accelerator program as the chief marketing officer of Immunity Project, a firm that, ambitiously, has aimed to develop and distribute a free HIV/AIDS vaccine.

Nothing fluffy about it
The third cofounder is Riccardo Spagni, better known by his fanciful moniker “fluffypony.” He is the lead maintainer of Monero, a privacy-oriented cryptocurrency, and will serve as Tari’s chief technology officer, a job tasked with building out Tari’s open source developer community.

Spagni and Jain previously collaborated on Project Coral Reef, a 2017 holiday season initiative that enabled people to shop at online stores for artists like Weezer, Sia, and Mariah Carey, using Monero.

Spagni won’t be leaving Monero behind, though he plans to continue lessening the centrality of his role there as focuses on Tari, which will be built “on top of Monero,” he says.

In technical terms, he says, the Tari blockchain will take the form of a “merge-mined side chain,” meaning its ledger will be linked—through a process known as cryptographic hashing—to the Monero blockchain. The two networks will share DNA, in other words.

In this way, Monero “miners,” the people who contribute computing resources to maintain the Monero blockchain, should be able to lend their CPU power to Tari with minimal extra effort, while earning Tari tokens for the additional work. This resource-sharing should, in turn, bolster the Tari blockchain’s security as it piggybacks on Monero’s established, preexisting network—one that has ballooned, since its founding in 2014, to a total market value of about $2.8 billion, per data provided by cryptocurrency tracker CoinMarketCap.

These are the plans anyway, Spagni says. The tech has yet to be built.

Show me the Monero
Ric Spagni has long demurred when asked to advise people’s “ICOs,” or initial coin offering ventures.

Spagni is skeptical about adding cryptocurrency to any project indiscriminately, but he thinks it makes sense for Tari. The blockchain needs a token, he says, to incentivize people to support it; in this case, the majority of the mining reward—the tokens issued by lottery to the network of computers responsible for securing the Tari blockchain—will go to the so-called miners, Spagni says.

As for the founding team’s crypto compensation: A small quantity of the Tari tokens will slowly dribble out to the cofounders over the course of three decades, Jain says. This may represent one of the longest vesting schedules for entrepreneurs behind any tech startup, he says. (It’s worth noting, however, that the assets will likely be liquid—meaning, not locked up, as is the case with private equity—and able to be traded as soon as they get dispersed.)

Despite the fledgling nature of the Tari project, its vision has garnered praise from at least one notable industry veteran. John Pleasants, ex-CEO of Ticketmaster and a former top executive at Samsung, Disney, and Electronic Arts, commended the project in a statement, saying it could “help all parties in the entertainment industry recover billions in lost revenue by better enabling how tickets are sold and re-sold.”

For video games, Pleasants said, an open market for digital assets could “greatly improve both monetization for publishers and the overall consumer experience.” He added: “It’s a way of facilitating legitimate free trade across many industries.”

Tari’s investors include a mix of traditional venture capital firms and cryptocurrency funds. On the established VC side, there’s Redpoint, Trinity Ventures, Canaan Partners, Slow Ventures, Aspect Ventures, and DRW Ventures. On the crypto side, there’s Blockchain Capital, Pantera, and Multicoin Capital.

Tari’s cofounders declined to reveal the size of the initial investment.

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Aspect Ventures' Jennifer Fonstad on Hot Areas of Tech, Diversity, & More

Jennifer Fonstad and Theresia Gouw launched Aspect Ventures with their own money in February 2014—and have hardly looked back. “We closed our first investment that first week,” Fonstad says. The pair went on to make a number of investments that first year before deciding to raise funds more formally from outsiders, like a conventional venture firm, and early in 2015 announced a $150 million fund. They announced their second fund, at $181 million, this January, with limited partners who include Melinda Gates and Cisco CEO Chuck Robbins.

(Read on xonomy)

Aspect was a rare (if not the only) venture fund in Silicon Valley founded by two women, but neither partner was a newcomer to venture capital. Fonstad had spent 17 years at powerhouse firm Draper Fisher Jurvetson, where she was a managing director. Gouw, meanwhile, was a partner at another top firm, Accel Partners, where she had been for 15 years. The two had known each other before that, going back to their early career days at Bain.

Their current fund focuses mainly on Series A rounds, but also seed investments, in a number of fields, chief among them cybersecurity, digital health, and the future of work. In part, the new funding will be used to expand the team, which now numbers nine on the investment side. I recently visited Fonstad at Aspect’s headquarters, which is housed in modest second-floor digs in downtown Palo Alto. We talked about those tech areas, some newer arenas Aspect is eyeing such as artificial intelligence, voice, and blockchain—as well as issues such as international competition, diversity, potential effects of trade sanctions on startups, and the changing nature of entrepreneurs themselves. (Read on to see what Fonstad says about the diversity of entrepreneurs in her firm’s portfolio and a kind of next-gen LinkedIn, among other things.)

Following is an edited transcript of our conversation:

Xconomy: Let’s start with some background on Aspect and your focus, what you started with originally and what’s new.

Jennifer Fonstad: We have deep experience and expertise in what I’ll call enterprise software categories: SaaS [software as a service], analytics, software security, digital health—and we have a fairly robust consumer presence as well. My co-founder, Theresia, had done quite a lot in software security, both as an entrepreneur and then as an investor. And I did quite a bit myself in digital health and next-generation analytics particularly. So those were some of the core areas we started in.

We’ve developed a number of different themes since then around the future of work and how employees, employers, and individuals, will be interfacing. A good example of this: Uber drivers, who technically are not employed by Uber, are coming together to develop their own association that would then be used to buy healthcare. So, how do employers think about innovating when there is a different type of workforce and a different type of community? What types of products and services will they require—in terms of education to get their first job but also in the job? How do you find those employees? How do you recruit them? How do you compensate them?

A little over a third of the fund right now is in security software–we had our first IPO in the fall of 2017, a company called ForeScout. About 20-25 percent is in the future of work, another 20 percent in digital health. And then we have new areas that we invest both at seed and then Series A, as the categories emerge.

X: Let’s talk about some of those new areas.

JF: We’re doing quite a lot in AI now, which permeates and touches so much of each of these categories and more. But a lot of our AI work is really focused on solving a particular business problem—using data in new and novel ways to solve a business problem that you couldn’t have solved before when you didn’t have access to that data and information. We have a number of investments in that category, and also in automated vehicle software. Because there’s a number of platforms, services and software, used in managing the car from an operations perspective—everything from digital mapping to communications.

Then we have done some investing around blockchain, but not blockchain asa cryptocurrency or as an asset class, but more around blockchain as a technology. We think about using identity and identity validation in new and novel ways—that has a whole host of areas for application, everything from our financial services industry to our healthcare system.

X: When you say identity—is that for security?

JF: Well, it doesn’t have to be security. Security is one category, but there are other areas, specifically around identity and identity management. Once you validate identity, how can you use that information in new ways or deliver different services around that in a new, novel way? Take title insurance, for example. There’s an entire industry that’s grown up around the notion of validating title insurance. Well, if you can manage security around validating your identity around what you own, then you can actually eliminate that entire industry. It’s a legal process that people are trying to validate—verify who you are. And then verify that specific property, which is sitting in records right how, in every town and county around the country. That information can be all managed through blockchain.

X: How about the future of work—what is your approach to that?

JF: That’s really driven by a number of startups that have begun imagining the world beyond the W-2—and how you think about your career and the services that you’re expecting as a next-generation worker. We’ve invested in companies like The Muse, which is based in New York and is one of the top sites for millennials to use for career management. They want to identify new job opportunities, and there’s a high degree of content. Then employers use that to present themselves and their culture and the types of work that they perform. It’s effectively like the next generation LinkedIn, where you may not be looking for a job but you’re actively thinking about your career and you’re learning about what the other careers are out there. Another example is Troops.ai, which basically works within Slack to enable you to update your Salesforce system, or any other system of record, and then enables your boss to aggregate that all. So you’re running from meeting to meeting, not sitting on your laptop—you’re on your phone. You can use the typing function, but you can also speak into the phone. This type of on-the-fly system is really understanding how workers of today and tomorrow will be working and then providing tools to enable them to do their jobs more seamlessly.

X: What about digital health? That’s something you’re personally interested in.

JF: That’s right. So digital health is another area where we see mobile devices accessing and using data in new and novel ways that will really change the way we are served healthcare and think about healthcare. Modern medicine is really only about 120 years old. The first medical schools were in, like, the 1890s—and how we’ve thought about our relationship with our own medical care and our doctors, and who’s been paying for those services, has rapidly been changing.

We think about digital health as being the next catalyst to change how that works. One investment we have—Khosla Ventures is also an investor—is Vida Health. They use a coaching platform as a means of managing chronic care. But they integrate in with your data collection devices, like a Fitbit. And then you as an individual have ongoing access to content and manage your own health with the help of your coach and your medical team.

X: Are you in the camp that says doctors aren’t going to be needed? (Editor’s note: Many believe Vinod Khosla, founder of Khosla Ventures, is in this camp. But as my interview with him a few months ago indicates, it’s not quite that simple.)

JF: There’s a whole host of chronic conditions where your doctor is still a critical part of the protocol that you should be following, but doctors don’t necessarily have to be driving each day, each week. And yet having someone who cares about your health has actually been shown to be the number one driver of behavioral change. That’s where having a coach and having a medical team available through your device has proven to be most important for healthcare action.

X: As you pursue these areas, what do you feel is different from other venture firms about what Aspect brings to the table?

JF: Aspect’s a little different in that we are very focused on Series A and very much focused on classic company building. There’s a lot of folks that say they do Series A, but it tends to be a small percentage of what they do. And there’s a lot of groups that do seed, but then as they get to Series A, they’re looking for another group to take that on. So that’s our singular focus. We work very collaboratively with seed funds and seed investors as well as with the bulge bracket funds. We think that for the entrepreneur the best syndicate is a syndicate that has at least two investors coming into the round, because they get different perspectives around the table and it doubles the networks that they’re utilizing. So if we’re leading an investment, we typically want to bring in another group who we think is a good fit. And vice versa. Other groups bring us in when they’re trying to build a syndicate with a team. We don’t have sharp elbows. We’re not trying to drive to a certain amount of dollars in a company, or a certain amount of ownership. We’re much more focused on building the right syndicate so we can work collaboratively.

X: How active are you, and in what ways are you active?

JF: We’re pretty active. We’ll typically take a board seat or board observer seat, and we’ll work pretty closely with the team in everything from recruiting new team members to their next round of funding to identifying first customers to pricing models and business models. It really depends on the stage and challenges the companies are facing.

X: Everybody says they do that kind of thing. But, as I’ve experienced personally, and also heard from many entrepreneurs, that often doesn’t happen.

JF: Yeah, so there’s a couple things we do differently. One is that we always have two team members working with a company rather than just one. The purpose of that is that we each, even internally, may bring different perspectives and can help different members of the company’s management team in different ways. I might have a strong relationship with the COO, the CFO, or the CEO, and another team member might be really strong with the VP of product or VP of engineering—so we can basically double the resources we’re bringing to the company. Also, whenever there’s an issue, if one of us isn’t available, the other is always available.

The other thing is that because Theresia and I founded this really as a boutique firm, we’re much more focused on company building. Theresia and I will never be on 15, 16 boards at any given time anymore. That was in our early days. Today, we’re much more focused on spending the time with the investments we’ve made. We’re not trying to build an empire, so we can afford the time to do that and do that well.

X: What about the type of entrepreneurs you work with—has that changed? Are the people who are becoming entrepreneurs different?

JF: That’s an interesting question. I do think that the nature of innovation is much broader. I’ve been in the industry for 21 years and, I mean, there’s just a lot more innovation across a much broader set of categories, which is really exciting. Just take security software. I mentioned about a third of our portfolio is in security software. That’s because security software is a much broader and bigger category than it ever was. You’re no longer just trying to build a wall. You sort of assume that there will be a breach—so you’re trying to identify where the breach happened. And then you get into containment, monitoring containment, and eradication. The size of the market, the breadth of the problems you’re trying to solve, has gone up logarithmically.

Social media didn’t exist 15, 20 years ago. And you have a whole host of innovation around how to use your networks and your relationships. IoT [Internet of Things] in the home didn’t exist before. Voice as a category is new. So if you just look across the wide range of industries that are being innovated, the breadth is unprecedented. So you’re also seeing a lot broader set of entrepreneurs coming forward with interesting ideas.

X: One question that I know that you get asked is about diversity. There’s so much data around the business benefits of diversity of all types, not just women. Are people from more diverse backgrounds trying to become entrepreneurs? Do you see that changing?

JF: Well, I think actually when you see the breadth of innovation that we’re talking about, and new categories, you’re also seeing a lot broader set of entrepreneurs coming forward with interesting ideas. And that does touch on people with different ethnicity, different backgrounds, and experiences. Certainly for Aspect, we focus on the best innovation in the category. Having said that, about 40 percent of our portfolio has a woman entrepreneur on the founding team. About 50 percent are immigrants or children of immigrants. Over a third are different ethnic backgrounds. So we have a wide range of entrepreneurs that we’re working with because we’re seeing in some of these new and emerging categories a different type of entrepreneur. Sixty percent-plus are men, but they’re looking for a different perspective. They want a different voice around the table than they’re typically getting.

X: Do you think it’s changed for women, in particular here in the Valley?

JF: It’s continuing to change. There’s a spark of innovation that was really driving a lot of entrepreneurs starting companies, which I think in and of itself has been really exciting. And there’s actually a lot more access to capital to get a company started. So I think that’s part of it. And there’s a lot more support between and among women, to offer ideas, insights, suggestions, encouragement—as well as from a number of men who recognize that not every entrepreneur or successful entrepreneur’s going to look the same as it may have 30, 40 years ago. So I think you’re seeing a lot more change happening.

X: You’re hopeful that it’s not just a short-term change?

JF: Oh, yeah, for sure.

X: Are there are more systematic things that can really make a difference, whether for women or people from a different ethnic background—like mid-level programs to manage people or projects so that they’re ready to be successful at the next level?

JF: A lot of that happens in larger-scale companies. I thought it was interesting the research that Google did that showed that the best performances were around diverse teams, as opposed to identifying one or two rock-star individuals and then building around them. Team formation is a big part of a lot of companies here in the Valley—the more they focus on diverse team building, I think the better outcomes they’re going to see. As a result of that, you’ll have people who are used to leading in different ways and will spin out.

X: Let’s talk about international competition. Do startups have to think internationally from an earlier time, for instance? Do you see more competition coming from areas like China or Israel?

JF: Our companies are doing business in China, Europe, and around the world. So we certainly think that from day one you have to be aware of what else is happening across the globe in your category in order to be sure that you know your solution set is truly novel and driving change. But I don’t know that I’d say that I see more competition. There’s more innovation in those areas, and I think that actually accelerates more innovation in the U.S.—so I don’t view that as a negative. Maybe those companies come here to sell their products and services, so that’s an opportunity for us to work with them.

X: Do you worry about trade sanctions hitting the entrepreneurial world?

JF: It really depends on the spiral. If the administration is putting out tariffs or trying to control trade in a small, narrowly defined area, there will for sure be a reaction from China or Europe or whoever else. If that response and reaction stays in that narrowly defined area, then it won’t necessarily permeate the innovation ecosystem. But if the reactions on both sides start to tip over into broader constraints, then you could put a damper on innovation. That’s a lose, lose, lose for those respective economies and global innovation in general.

Right now it seems to be relatively contained. However, if emotions and ego get involved, all bets are off.

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Energy Sharing Service, OhmConnect, Announces New Series B to Bring Total Funding to $15M

In celebration of this upcoming Earth Day, popular California-based energy sharing service announces it will introduce new ways to deliver cash back energy payments to users and explore new markets with $8.5M in Series B funding.

(Read announcement)

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A Seat at the "CAP" Table: How to Encourage More Female Investors to Back Female-Founded Firms

Gwynnie Bee co-founder and C.E.O. Christine Hunsicker and Jennifer Fonstad, co-founder of Aspect Ventures discuss the importance of diversity and how it impacts all aspects of your business with CNN's Christine Romans.

(Watch the discussion).

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Astro Named A Best Productivity App For 2018

Sometimes the best way to escape from a productive rut is to switch up your tools. Whether it’s a simple word processor, a smarter to-do list, or a more efficient way to transcribe interviews, downloading some new apps can help manage your time and produce better work. Here are some of the best productivity apps for phones, tablets, and computers that launched in the last year or got a substantial upgrade.

EMAIL ENHANCERS
An inbox assistant. Next time you’re feeling overwhelmed by email, ask Astro to help. The app’s built-in virtual assistant can remove clutter, create follow-up reminders, and highlights email that might need your attention. Version 3.0 arrived in January, adding a new design, AI improvements, and a built-in calendar. [iOS, Android, Mac]

(Read more on Fast Company)

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